The European Central Bank president, Mario Draghi, has been a huge advocate for easy money policies. In fact, he’s been bloviating for the better part of the past few years about the need to ease policy by any means necessary.

Discounted loans to fat-cat bankers.

Massive purchases of covered and asset-backed bonds.

Verbal intervention designed to devalue the euro currency.

He’s done it all.

Investors are so used to Draghi handing out the goodies that they couldn’t wait to see what he would spoon up at today’s policy meeting. Instead, he served up a nothing-burger this morning.

The euro had a wild ride this morning.

He didn’t announce the full-scale Euro-QE that the monetary addicts were hoping for, saying the council would push off a decision until early 2015. That likely reflects German resistance to even more radical measures, considering the ECB is already in the process of Hoovering up all sorts of other bonds with the goal of boosting its balance sheet by another $1.2 trillion.

Yet even as he failed to announce Euro-QE, he did say the ECB was cutting its inflation and growth forecasts. That’s akin to saying “Yes, the patient is getting sicker, but no, we’re not going to give him any medicine for a while!”

Investors were not amused. They dumped the dollar, and dumped U.S. stocks, at least in the early going. As a matter of fact, the euro had one of its biggest counter-trend rallies intraday since Draghi launched his debasement strategy in the spring.

But then in the early afternoon — perhaps after realizing that the only way to keep the addicts upright was to pump ’em full of more drugs — ECB officials leaked to the press that they were preparing a “broad-based QE Package” for the January policy meeting. That would likely include sovereign bonds, in addition to all the other bonds it’s already buying.

So what happened? The euro lost half of its intraday gains, while stocks spiked to an intraday high before settling ever-so modestly lower.

“I have never seen a bigger bunch of hyper-sensitive policymakers in my lifetime.”

If you think this kind of craziness makes it look like central bankers have become a bunch of daytraders, you’re right! I have never seen a bigger bunch of hyper-sensitive policymakers in my lifetime. They can’t seem to take the drugs away for even a few hours, and are totally beholden to the hissy fits of Wall Street traders.

It’s a sad state of affairs, but it’s the one we have. So you have to make sure you trade and invest accordingly — and prepare for these kinds of crazy bouts of volatility!

So what do you think about all the Draghi Drama? Are central bankers too involved in market moves these days? Or do you think that corporate fundamentals are more important than central bank proclamations?

Also, would you buy or sell the euro here, based on what you’re seeing and hearing from Europe? Use the Money and Markets website as your outlet because your fellow investors want to hear from you!

Our Readers Speak

Yesterday’s piece on Vladimir Putin brought out a ton of valuable insights and comments at the website, so let’s get right to them.

Reader John said:

“I think Putin was well aware that the Western nations would not be pleased, or even fooled by the strong arm moves he’s making now in Eastern Europe. But he also knows that he holds a number of trump cards that will make it difficult for others to stop him — in what now looks pretty clearly like territorial expansion. Among them are:

— Geographic proximity: He is there, close at hand, whereas the Western nations are not

— A high density of Russian populations in targeted areas creating internal support

— The extreme power of the Russian military, clearly without equal after the U.S.

“Although I’m sure he expected kick back and suspected it would be in the form of sanctions rather than direct military confrontation, he may have underestimated the damage sanctions would have on his country’s economy and currency.

“After all, Putin is no economist and he probably doesn’t listen to economic advisors if they don’t support his goals. And I think it’s a good bet he didn’t anticipate the collapse of oil prices, undermining Russia’s financial bread and butter. But given his mindset I think backing down is not conceivable. So he’ll press ahead and try to adjust to changing circumstances with the aim of winning in spite of the economic costs.”

Reader Paul also believes Putin will just keep pressing on, despite economic pressure from the West. His comments: “Dear American friends, please don’t be naive in under-estimating Russia! The imposed sanctions on Russia will only lead to dividing the world, inflicting economic pain on the West as well, and Putin teaming up with China to become the lead economy and block against U.S. and your little European allies. Remember, Russians are great chess players, and unfortunately Obama and his European cronies are not in their league.”

To fight back, Reader Stu suggested that Russia could launch an economic war of its own. His view: “What if Putin sold Russia’s U.S. Treasuries — he could co-ordinate this with China also actively selling their Treasuries as well. Doing so would probably wreck havoc on Western markets.

“Sound far-fetched? So did Russia annexing Crimea. When a dictator like Putin is boxed in you can bet he’ll probably double-down.”

And speaking of doubling down, Reader Chris N. said he wouldn’t be surprised if Putin goes even further. His view: “Putin will be more aggressive in the Crimea. He will probably invade the Baltic States and threaten Poland in order to get concessions from the West that has no stomach for another war.”

Great contributions all around. It’s clear that Putin is bearing a heavy economic toll for his actions, but that certainly hasn’t deterred him yet. Nor is it rebounding on the West … yet. Will that change? Keep a close eye on Europe and be prepared to react if so.

While we’re on the subject of Russia, Islamic fighters in the breakaway republic of Chechnya attacked several buildings and security forces in the capital of Grozny. Explosions and gun battles reportedly resulted in the death of 10 police officers and nine militants.

Where are gas prices the cheapest? Oklahoma City! Proximity to oil supplies and low state gas taxes have combined to drive prices there to just below $2 per gallon at a handful of stations. Other nearby states like Texas could follow suit soon.

The long, slow bleed continues for Sears Holdings (SHLD, Weiss Ratings: D). The iconic department store retailer is shutting another 235 stores amid losses that totaled $548 million in the most recent quarter. The company maintains that it has enough liquidity to fund its operations, however.

Another day, another protest against alleged police brutality, this time in New York City. Protestors there are angered that a grand jury didn’t indict officer Daniel Pantaleo, who put a chokehold on Eric Garner that preceded Garner’s death.

Until next time,

Mike Larson

Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.

{13 comments }

tommrThursday, December 4, 2014 at 5:07 pm

I don’t believe that it gives any country leverage to threatening to sell a hoard of US Treasury Bonds. The Federal Reserve would buy all of them with it’s Air Money. Japan tried to play this card in 1987 and it totally back fired on them. They still have not recovered!!

H. Craig BradleyThursday, December 4, 2014 at 6:10 pm

PULL A RABBIT OUT OF YOUR HAT

It is more profitable to not pay too much attention to U.S. BANKERS or overseas central bankers. It is not worth your time chasing that dog. What is worth your attention is how markets respond in real time. Take Energy for example. The Energy Select SPDR ( XLE) is down -20% since June when oil started to roll-over. Oil moves opposite to the U.S. dollar and is very responsive to changes in the exchange rate and the U.S. Dollar Index.

So, better buy some energy stocks, as the whole sector is in a major correction for now. If you hesitate, you are then acting against central bankers, who always have “one more QE” in the wings or even lower interest rates ( pull a rabbit out of their hats ). Before you know it, the energy sector will be back on track and headed up to a more moderate price level. Every correction since 2011 has been a V-Shaped recovery. Why would this one be ANY different?

anthony gThursday, December 4, 2014 at 7:09 pm

Getting interest rates right is a job for markets. This artificial stimulus may lead to war instead of prosperity.

neal weintraubThursday, December 4, 2014 at 7:10 pm

Gee Mike, tell me what I do not know.

neal weintraubThursday, December 4, 2014 at 7:11 pm

Buy XLE and that advice is free.

JeffThursday, December 4, 2014 at 7:15 pm

Mike–Thanks for asking this question. Would I buy the Euro right now?–Hell no!. Putin’s economy is crashing due to oil prices and global sanctions but the Euro is only propped up by fake-money policies like what you describe (and which are also in play in the U.S.). Investing in the Euro right now is like investing in the hope that Putin will not try to retake the rest of Ukrain, Belarus, Latvia and many other former Soviet satellites. When he does that, and when Europe has no money to support its own defense, what is going to happen to investments in Europe? I’m not going to answer this because you already know.

–Jeff in Texas.

Geoffrey SelfThursday, December 4, 2014 at 9:22 pm

The SS Manhattan sailed the Nothwest Passage in 1969 which is used in part to demonstrate the passage is international water despite Canada’s claim that it is internal waters. Should we watch for Putin to exploit that controversy and start incursions into North America? Crimea II?

Francis IrvineFriday, December 5, 2014 at 4:02 am

A history lesson for Americans who are totally ignorant of the rest of the world. Crimea is a Russian province, it has never been Ukrainian. The Russian idiot Kruschev offered the administration of Crimea to Ukraine, It was his home country to relieve unemployment & score points with Ukraine he allowed Crimea home a Russian fleet harbor to be administered by Ukraine. If we are talking about annexing territory, lets start with Hawai, and Panama under George Bush senior, America itself was annexed, it’s inhabitants are a group of social scroungers in their own land. Russia has never dropped an A bomb, or invaded anyone since becoming the Russian federation. It is far more democratic than the USA which has become a servant of the Bilderburg group. Obama is trying to settle a score from his first visit to Russia where he was scorned by everyone, every where he went. If the USA cant beat Vietnam, Iraq, Isis or Afghanistan, Russia is winning already.
The combined financial might of BRICS poses the biggest threat to the Federal Fractional Reserve system owned by British and Dutch interests. It’s contract to steal the US Dollar’s value expired in December 2013. President Kennedy fired them, introduced a none debt silver dollar financial system are desperately trying to start total devastation, so they can get their UN

SydFriday, December 5, 2014 at 5:18 am

Couldn’t agree more about Draghi-Mania and the failed policy of the ECB. Of course it is designed to boost the economies of France, Italy, and Greece, but the banks there are still not issuing loans to small and medium sized entrepreneurs in these countries. On the other hand ECB policy does nothing for the countries with stonger economies with sometimes
negative interest rates like Germany.
Draghi may pospone the ultimatge fall of the Euro. Germany will reluctantly play along for the sake of European unity just as they have with the western sanctions against Putin, but this cannot last forever.

Francis IrvineFriday, December 5, 2014 at 6:25 am

A history lesson for Americans who are totally ignorant of the rest of the world. Crimea is a Russian province, it has never been Ukrainian. The Russian idiot Kruschev offered the administration of Crimea to Ukraine,(It was his home country) to relieve unemployment & score points with Ukraine voters. Crimea is home to part of the Russian fleet. It was only administered by Ukraine as a gesture. If we are talking about annexing territory, lets start with Hawai, and Panama under George Bush senior, Iraq, + a long list. People in glass houses should be careful where they aim their stones. Russia only reacts to aggression, it doesn’t make accusations of wishful thinking on behalf of NATO a useless toothless bulldog that should have been retired. America itself annexed it’s inhabitants which have been deliberately reduced to a group of social scroungers in their own land. Russia has never dropped an A bomb, or invaded anyone since becoming the Russian federation. It is far more democratic, it scores far higher in terms of citizens freedom than the USA which is a servant of the Bilderburg group. Obama is a foriegner trying to settle a score from his first visit to Russia where he was scorned by everywhere he went. If the USA cant beat Vietnam, Iraq, Isis or Afghanistan, Russia is already winning both financially and militarily. Who in their right mind wants to rule a country of dual citizens who are not actually Americans but Africans living and absorbing social services paid for by Americans but are African Americans. We tell the difference by the way they conduct themselves, when US law is in their favour it’s fine, when it’s not they burn, destroy & steal like a plague of locusts. Did you notice when Japan had a meltdown, there was total calm, no one stole, looted or mugged. Why do you think they don’t have that problem?? Simple’ negroid mamalian bipeds are not allowed there for long, nor are Palestinians, Moslems or none Japanese nationals. It is nation of born citizens, not the refuse of the underworld.
The combined financial might of BRICS poses the biggest threat to Federal Fractional Reserve system, owned by British and Dutch interests. It’s contract to steal the US Dollar’s value expired in December 2013. Sold the rights by president Woodbrain Wilson in 1913. The fed was fired by President Kennedy. the Rothschild/ Rockerfeller, European black royalty owned private bankers (Federal reserve) when he introduced a debt free silver dollar financial system. He was murdered 2 months later some coincidenc., The Royal Dutch Shell owned United nations is desperately trying to start total global anarchy & devastation. The Soros run IMF will eventually, when the population cull is met they UN’s Special drawing Rights as the global currency their
UN inspired New World Order (Hitlers wet dream) will have begun. Putin, Russia, Serbia, are all that stands in it’s way if their ISIS sponsored wankers defeat Syria.

DomFriday, December 5, 2014 at 9:38 am

I do think central bankers are too involved but better than the alternative as we see developing in Europe. It would get a lot worse and take years for Europe to recover if we leave the patent alone.

Super Mario will do QE but not as much as is required. If you think the EURO will fall as I expect vs the $US buy ProShares UltraShort Euro (EUO:US).

Also just like Japan stocks are doing great because of doing QE, buy EURO stocks for quick appreciation. They will also thrive with a QE shot.

Al McNalSaturday, December 6, 2014 at 10:01 pm

I have two considerations to suggest:

Is printing money to no end going to make a stronger currency?

Does a country or (EU, Japan or the US) need a strong currency upon which to build a stable economy or can a stable economy be built upon an currency in which the value cannot be counted upon?